“The Bank of Japan’s policy board unanimously voted to maintain monetary policy even after a report yesterday showed the country slipped into a recession following a record earthquake.
Governor Masaaki Shirakawa and his eight colleagues decided to maintain a 30-trillion yen ($370 billion) credit program and a 10-trillion yen asset-purchase fund that represent the bank’s main policy tools. Deputy Governor Kiyohiko Nishimura dropped his call made last month to expand asset buys to provide more stimulus. The key overnight rate was kept at zero to 0.1 percent.
Signs of a deteriorating economy put renewed pressure on the BOJ to provide additional stimulus after it stepped-up asset purchases and flooded money markets with cash in the wake of the March 11 temblor. Shirakawa said the economy will rebound later this year as production and supply constraints ease, while warning about the outlook for electricity supply in the long run.
“Given that policy options are pretty limited, the BOJ probably wants to preserve as much ammunition as possible,” said Mari Iwashita, chief market economist at SMBC Nikko Securities Inc. in Tokyo. “Chances for additional easing are still alive and we could see the BOJ expand asset purchases by 5 trillion yen, as the deputy governor proposed, around August.” ”
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